Germany's ZEW survey of economic sentiment drops unexpectedly but remains at high level

FRANKFURT – A widely followed index of German business optimism dipped unexpectedly in January but remained at a high level, suggesting an ongoing upswing in Europe’s largest economy.

The index published Tuesday by the ZEW, or Centre for European Economic Research, eased to 61.7 points from 62 in December. Market analysts had expected a rise to 64.

The ZEW said the index, despite its small drop, was “hovering at a high level” well above its long-term average of 24.4 points. ZEW President Clemens Fuest said the figure confirmed expectations for an economic upswing among the financial market experts who were surveyed.

Germany’s economy expanded only 0.4 per cent in 2013 but stronger growth is expected this year as the country’s eurozone trade partners slowly put their financial crises behind them.

Jonathan Loynes, chief European economist at Capital Economics in London, said that “the optimistic tone of the survey supports our expectation that Germany will record relatively solid growth of about 1.5 per cent in 2014.”

He cautioned that “even the super-competitive German economy” could suffer from a stronger euro that could hold back exports. Selling cars and industrial machinery abroad is a pillar of Germany’s economy, which has low unemployment and a strong trade surplus.

The index is based on a survey made Jan. 6-20 of 254 investment analysts.